Below is the transcript of the Wells Fargo & Co (NYSE:WFC)’s 4th Quarter 2014, earnings conference call, held on 14th January, 2015 at 10:00 a.m. EST.
Wells Fargo & Co (NYSE:WFC) is a community-based, diversified financial services company. Being community-based distinguishes them from every other large bank. By “community-based” they mean they’re not just a bank that happens to be in the community; they’re a community bank. They’re “in and of” every community in which they do business, whether it’s Chapel Hill, N.C.; or Mason City, Iowa; or Roseville, Calif. And they’re in more U.S. communities than any of their competitors.
Participants:
Company Representatives:
Jim Rowe, Director Industrial Relations.
John Stumpf, Chairman and Chief Executive Officer.
John Shrewsberry, Chief Financial Officer.
Analysts:
Joe Morford, RBC Capital Markets
John McDonald, Sanford C. Bernstein & Company
Erika Najarian, Bank of America Merrill Lynch
Ken Usdin, Jefferies Group
Paul Miller, FBR
Bill Carcache, Nomura Securities
Mike Mayo, CLSA
Matt O Connor, Deutsche Bank
Betsy Graseck, Morgan Stanley
John Pancari, Evercore International Strategy & Investment
Eric Wasserstein, Guggenheim Securities
Chris Mutascio, Keefe, Bruyette & Woods
Nancy Bush, NAB
Marty Mosby, Vining Sparks.
Operator
Good Morning, My name is Regina and I will be your conference operator today. At this time I would like to welcome everyone to the Wells Fargo 4th Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a questions-and-answers session. If you would like to ask a question during this time, simply press star and then the number 1 on your telephone keypad. If you would like to withdraw your question, press the pound key. I would now like to turn the call over to Jim Rowe, Director of Industry Relations. Mr. Rowe, you may begin your conference.
Jim Rowe, Director Industrial Relations
Thank you, Regina, and good morning, everyone. Thank you for joining our call today where our Chairman and CEO, John Stumpf; and our CFO, John Shrewsberry will discuss 4th Quarter results and answer your questions. Before we get started, I would like to remind you that our 4th Quarter earnings release and quarterly supplement are available on our website at wellsfargo.com. I would also like to caution you that we may make forward-looking statements during today’s call that are subject to risks and uncertainties.
Factors that may cause actual results to differ materially from expectations are detailed in our SEC filings, including the form 8-K filed today containing our earnings release and quarterly supplement. Information about any non-GAAP financial measures referenced, including a reconciliation of those measures to GAAP measures, can also be found in our SEC filings, in the earnings release and in the quarterly supplement available on our website. I will now turn the call over to our Chairman and CEO, John Stumpf.
John Stumpf, Chairman & Chief Executive Officer
Thank you, Jim. Good morning and Happy New Year to everyone. Thank you for joining us today. We just completed another outstanding year at Wells Fargo. We generated record earnings, produced strong deposit and loan growth, grew the number of customers we served, improved credit quality, enhanced our strong risk management practices, strengthened our capital and liquidity levels, and rewarded our shareholders by increasing our dividend and buying back more shares.
Our achievements during 2014 demonstrated the benefit of our diversified business model and our continued focus on the real economy. Let me share just some of our accomplishments during the past year. We generated earnings of $23 billion and earnings per share of $4.10, both up 5% from the prior year.
We grew both revenue and pretax pre-provision profit. We had strong broad-based loan growth. Our core loan portfolio increased by $60 billion, or 8%. Our deposit franchise continued to generate strong consumer and balanced growth with total deposits up $89 billion, or 8%. And we grew the number of primary consumer checking customers by 5.2%.
Our credit performance continued to be very strong with net charge offs [inaudible 3:11]down $1.6 billion, and our net charge off ratio declining to just 35 basis points for the year. Our capital levels increased even as we returned more capital to shareholders. We returned $12.5 billion to our stockholders through dividends and net share repurchases, up 74% from a year ago.
While we serve our customers throughout the world, 97% of our revenue comes from the United States, and there have been many signs of strength in the US economy. GDP growth accelerated during 2014 and may be even stronger in 2015. Last year was the strongest year of job growth in 15 years and December was the 50th consecutive month of job creation, unprecedented in the US history. Consumer confidence is at its highest level since the peak of the last economic expansion. Home ownership remains an aspiration for most Americans and recent developments such as the announced reduction in FHA premiums, GSE clarification on re-purchase rules and changes in GSE lending guidelines should provide some benefit to the housing market where affordability remains attractive.
While lower oil prices have created volatility in the financial markets, – America as a whole is a net consumer of energy – and American households will benefit from the decline in energy prices, which is positive for the US economy. I believe the improvement in the economy, the strength of our balance sheet, the diversity of our businesses and the continued commitment of our team members to meet our planned [inaudible 05:02] customers’ financial needs will provide Wells Fargo with many opportunities in the year ahead. John Shrewsberry, our Chief Financial Officer will now provide more details on our 4th Quarter results. John.
John Shrewsberry, Chief Financial Officer
Thank you John and good morning everyone. My comments will follow the presentation included in the quarterly supplement starting on page 2. John and I will then answer your questions. Wells Fargo had another strong quarter, earning $5.7 billion and $1.02 in EPS in the 4th Quarter. Our results included continued strong loan and deposit growth that was diversified across our businesses – and credit quality continued to reflect the benefit of our ongoing risk discipline.
Our capital levels remain strong, even as we returned $3.9 billion to the shareholders in the 4th Quarter through common stock dividends and net share re purchases. Slide 3 highlights our strong full-year results that John discussed at the beginning of the call, including increased revenue in pre-tax, pre-provisioned profit, strong loan and deposit growth, higher earnings and increasing our net payout ratio to 57%.
Page 4 highlights our revenue diversification and the balance between spread and fee income in the fourth-quarter. The benefit of our diversified business model is that we have over 90 businesses that performed differently based on interest rates and the economic environment. While the balance between spread and fee income has remained consistent over time, the drivers of fee income have varied. For example, over the past five years mortgage banking as a share of total fee income has been as high as 28%, but, because of the decline in mortgage refinancing activity, mortgage banking fees have declined as expected and represented 15% of fee income in the 4th Quarter. However other businesses have benefited from current market conditions. Our trust and investment fees have steadily increased over the past five years and were 36% to fee income in the fourth-quarter. These examples demonstrate the benefit of our diversification and how our business mix enables us to focus on meeting our customers’ financial needs while maintaining our risk discipline.
Let me highlight some key drivers of our 4th Quarter results from the balance sheet and income statement perspective, starting on page 5. I will discuss the drivers of our strong loan and deposit growth later in the call. Short term investments in fed [inaudible 7:26] funds sold declined $3.5 billion from 3rd Quarter due to the deployment of liquidity in the loans and investment securities. This is the first time since the 4th Quarter of 2011 that we have had a linked quarter decline. Investment securities increased $24 billion from the 3rd Quarter due to $35 billion of purchases, partially offset by run-off in maturities. The majority of our purchases were US Treasury and federal agency securities.
Turning to the income statement on page 6, revenue grew $230 million during the quarter, with growth in net interest income and stable non-interest income. Expenses increased in the quarter, reflecting higher personnel costs, continued investments in our businesses and risk related initiatives, and some typically higher 4th Quarter expenses. Our results in the quarter also reflected lower income tax expense which was down $123 million.
As shown on page 7, we continued to have strong broad-based loan growth in the 4th Quarter, our 14th consecutive quarter of year over year growth. The core loan portfolio grew by $60.4 billion or 8% from a year ago and was up $26 billion or 13% annualized from the 3rd Quarter. Loan growth in the 4th Quarter included $6.5 billion from financing related to the sale of our government guaranteed student loans as well as the Dillard’s credit card portfolio acquisition. Our liquidating portfolio decreased $20.1 billion from a year ago and it is now only 7% of our total loans, down from 22% at the end of 2008. Total average loan yields remained fairly stable, declining just two basis points from the 3rd Quarter.
On page 8, we highlight our loan portfolios that has strong year over year growth. C&I loans were up $36.4 billion or 15% from a year ago, with broad-based growth that I will highlight on the next page. Core one to four family first mortgage loans grew $14.4 billion or 7% from a year ago, reflecting continued growth in high quality conforming mortgages – pardon me – non conforming mortgages primarily jumbo loans. The credit quality of our core mortgage portfolio is outstanding, with only six basis points of annualized credit loss in the 4th Quarter. Auto loans were up $4.9 billion, or 10% from last year. While we continued to benefit from the strong auto market, new originations were down from a year ago, reflecting our continued risk and pricing discipline in a competitive market. Credit card balances were up $4.2 billion or 16% from a year ago, benefiting from a combination of organic account and loan growth as well as the benefit of Dillard’s portfolio acquisition.
Slide 9 demonstrates the diversity of businesses that contributed to the growth in C&I loans. Let me highlight just a few. Asset backed financing increased $16.7 billion, which included $6.5 billion from financing related to our government guaranteed student loan sale. Corporate banking grew $5.8 billion, driven by new customer growth and higher utilization rates from existing customers. Capital finance grew $3.8 billion, reflecting new customer growth.
As you can see on page 10, we had over $1.1 trillion of average deposits in the 4th Quarter, up $22.7 billion or 8% annualized from the 3rd Quarter. Our average deposit costs declined 1 basis point to 9 basis points in the 4th Quarter. Our strong growth in checking customers continued in the 4th Quarter, with primary consumer checking customers growing 5.2% from a year ago, and primary small business and business banking customers increasing 5.4%. Our success reflected the advantages Wells Fargo offers including broad based and industry leading distribution channels, enhanced product offerings that make it easier for customers to do more business with us and improved customer retention.
We continued to grow net interest income on a tax equivalent basis, up $255 million from the 3rd Quarter, reflecting strong growth in average earning assets up $43.5 billion or 3%. Our net interest margin declined 2 basis points from the 3rd Quarter due to strong deposit growth, which resulted in higher average balances of cash and short term investments and from actions we took in the 3rd Quarter which resulted in higher average balances in liquidity related funding. The impact of all other balance sheet growth and reprising benefit of the margin by 3 basis points due to a larger investment portfolio and stronger loan originations. Increased interest income from variable sources benefited the margin by 1 basis point. Our balance sheet remains asset sensitive so we are well positioned to benefit from higher rates. But as we have demonstrated by growing net interest income throughout the year, we are not relying on rates to increase to generate growth. Of course the 1st Quarter will be impacted by too fewer days in the quarter.
Total non-interest income was stable from 3rd Quarter, as higher trust and investment fees, card fees, commercial real estate brokerage commissions and a $217 million gain on the sale of government guaranteed student loans was offset by a $396 million decline in market sensitive revenue driven by lower equity gains and lower mortgage banking revenue and deposit service charges. The decline in deposit service charges in the 4th Quarter was primarily due to the lower over draft related fees resulting from changes we implemented in early October designed to provide customers with more real time information to manage their deposit accounts and avoid over drafts.
Mortgage banking revenue declined $118 million from the third quarter. As expected, mortgage origination income was down from last quarter reflecting reduced volume from the seasonally low purchase market. The decline in mortgage rates during the quarter resulted in refinancing volume increasing to 40% of originations, up from 30% last quarter. While it is still early, the continued declining rates could benefit origination volumes in the 1st Quarter and we currently expect volumes to be relatively consistent with 4th Quarter levels despite the fact that the 1st Quarter usually reflects a slower purchase market. Our gain on sale margin was consistent with last quarter and is expected to remain within the range we have seen over the past four quarters. Servicing income increased modestly from the 3rd Quarter, reflecting lower unreimbursed direct servicing costs, partially offset by lower net head results. Our total trust and investment fees were up $3.7 billion in the 4th Quarter which was a record high, and increased $151 million from 3rd Quarter driven by higher investment banking activity.
Our expenses continued to reflect our investments in our businesses including risk related initiatives. As shown on page 13, expenses were up $399 million from 3rd Quarter. There were a number of factors driving this increase – personnel expenses increased $272 million, reflecting higher deferred comp expense which is offset in revenue, higher revenue based incentive compensation and higher healthcare costs. A number of expenses are typically higher in the 4th Quarter; equipment expense was up $124 million, primarily due to annual software license renewals; outside professional services increased $116 million, which included higher project related spending on business investments; as well as risk related initiatives. Advertising (average housing) [inaudible] expenses were also elevated, up $42 million from the 3rd Quarter. While these typically higher expenses should be lower next quarter, we will have seasonally higher personnel expenses in the 1st Quarter reflecting incentive compensation and employee benefits expense. Our expenses will also reflect our continued investment in our infrastructure, our risk infrastructure, including hiring new team members and ongoing project spending.
Our efficiency ratio was 58.1% for full-year 2014 and we expect the efficiency ratio for full-year 2015 to remain within our target range of 55% to 59%. Even at the upper end of our target range, we are operating more efficiently than many of our peers.
Turning to our business segments starting on page 14, community banking earned $3.4 billion in the 4th Quarter, up 7% from a year ago and down 1% from the 3rd Quarter. I have already highlighted the strong growth in primary checking customers, we have also been successfully adding retail bank households. Through November, our year to date household growth rate was the highest since 2010. Meeting the financial needs of these new households will help drive across our diversified product line. Our debit and credit card businesses are examples of where we have had success and yet still have opportunities for continued growth. Debit card purchase volume was up 8% from a year ago driven by primary checking customer growth and increased usage from our existing customers. Our credit card penetration rate increased to 42%, up from 37% a year ago. Credit card purchase volume grew 17% from a year ago reflecting account growth and increased usage among our existing customers.
Wholesale banking earned $2 billion in the 4th Quarter, down 7% from a year ago and up 3% from the 3rd Quarter. Loan growth continued to be strong, with average loans up $32.2 billion or 11% from a year ago, with growth across many businesses as I highlighted earlier. Credit quality remained outstanding, with eight consecutive quarters of net recoveries. Deposit growth was also strong, with average core deposits up $33.9 billion or 13% from a year ago.
Results also benefited from strong investment banking fees up 10% from a year ago, driven by higher loan syndication fees, high yield debt origination fees and equity underwriting. Treasury management revenue increased 11% from a year ago benefiting from record product sales in 2014 and re pricing. Wealth brokerage and retirement earned $514 million in the fourth quarter, up 5% from a year ago and down 7% from the 3rd Quarter. Revenue grew 6% from a year ago, with growth in both net interest income and non-interest income.
The growth in fee income was driven by a 12% increase in asset based fees as we continued to execute on our strategic initiative of focusing on plan based relationships resulting in higher recurring revenue. Our brokerage advisory assets grew to $423 billion, up $48 billion or 13% from a year ago, primarily due to positive net flows. Loan growth for WBR remained strong, up 13% from a year ago, the 6th consecutive quarter of double digit year over year growth. This growth was primarily driven by an increase in high quality non-conforming mortgage loans.
Turning to page 17, credit quality in the 4th Quarter remained strong, with a net charge off ratio of 34 basis points of average loans. The $67 million increase in net charge offs from 3rd Quarter was primarily driven by lower recoveries down $54 million, which we would expect at this stage of the credit cycle. Non-performing assets have declined for nine consecutive quarters and were down $739 million from 3rd Quarter. Non-accrual loans declined $517 million, and foreclosed assets declined $222 million. The reserve release was $250 million in the 4th Quarter, down $50 million from 3rd Quarter and down $350 million from a year ago. Our capital levels remain strong, with our estimated common equity Tier 1 ratio under Basel III, using the advanced approach fully phased in at 10.44% in the 4th Quarter. Our ratio declined slightly from the 3rd Quarter, reflecting an increase in risk weighted assets primarily from strong loan growth in the quarter.
We have stated that our long term target is 10%, which includes a buffer over required minimums. Since we have achieved our targeted level, our capital ratios may fluctuate from quarter to quarter, reflecting changes in asset levels or composition, or changes in OCI impacted by market volatility. These potential changes are why we maintain a buffer.
As shown on slide 19, we returned $3.9 billion to shareholders in the 4th Quarter. Our common shares outstanding declined by 45 million shares in the 4th Quarter, reflecting 62 million shares purchased during the quarter. In addition, we entered into a $750 million forward repurchase contract that is expected to settle in the 1st quarter for approximately 14 million shares. As a reminder our share issuance is usually higher in the first half of the year, given the timing of certain employee benefit plan issuances.
So in summary, our results in 2014 and for the 4th quarter reflected the benefit of our diversified business model, with strong growth in loans and deposits. Our loan portfolio is well diversified and charge offs were near historic lows. We increased the amount of our capital and liquidity and returned $12.5 billion to shareholders through dividends and share repurchase. Our net payout ratio was 57% for the year within our targeted range of 55% to 75%. We believe we are well positioned to benefit from an improving economy, an increased customer base, our diverse product line and our continued risk discipline. Our diversified business model has performed well across a variety of economic and interest rate environments and I am optimistic that it will continue to produce opportunities for our customers, our team members and our shareholders in the year ahead. We will now be happy to answer your questions.
Operator
At this time I would like to remind everyone, in order to ask a question press star, then the number 1 on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Our first question will come from the line of Joe Morford, RBC Capital Markets. Please go ahead.
Joe Morford, RBC Capital Markets.
Thanks. Good morning everyone. I just wondered if you could speak to how we should think about weighing the positive and negative effects of the sharp drop in energy prices on the bank. While it should help out the consumer businesses, is this enough to offset any potential credit issues or possibly slowdown in loan growth and investment banking activity?
John Stumpf, Chairman & Chief Executive Officer
Well, as I mentioned in my comments, Joe, since the United States is a net consumer, net importer of oil, we think it’s a positive for the US economy, clearly. That is on average – because there’s going to be some states that are impacted, some customers who are going to be impacted and some businesses are going to be impacted. But we serve 70 million customers and virtually all of them know how to fill a gas tank and go to a gas pump. And that’s a real benefit. So we think net-net – it’s an opportunity. Surely there are offsets, like we said. But even within the oil and gas business, and John mentioned, we are a participant there, it’s about 2% of our loans. There is still a lot of opportunity for consolidation there and we’ll participate in that with our customers. We are looking at our portfolio. We analyze that. We have been through that over the past, but net-net we think it’s a positive.
Joe Morford, RBC Capital Markets.
Okay, great. I guess, somewhat related to that, you know, it seems recently the expectations now that higher rates are getting pushed out, it could be lower for longer, which theoretically could weigh on margins. Do you expect to be able to offset that with better growth in the business amidst a stronger economy as you talked about? Or, you know, do you see any need to take a harder look at expenses and what other levers might you have to pull there?
John Shrewsberry, Chief Financial Officer
We are always taking a hard look at expenses. So, there’s nothing incremental that we would plan on doing there, but continuing to be as vigilant as we have. We have been operating at a pretty strong level – in a zero interest rate environment – for a very long time, and, well, because of the way our balance sheet is positioned, it would probably be – there is upside when short term rates move, and if that happens later, then that upside might be realized later. We are continuing to position ourselves to compete and to perform in this interest rate environment. So, loan growth, deposit growth, re deploying excess liquidity into earning assets, as I said, being vigilant on expenses, all of those things contribute to the performance that we have had and that we are anticipating continuing to have, until the time that rates begin to move.
Joe Morford, RBC Capital Markets.
Okay. Thanks so much for the thoughts.
Operator
The next question will come from the line of John McDonald with Sanford Bernstein. Please go ahead.
John McDonald, Sanford Bernstein
Hi, Good Morning. I was wondering, John – just a question on credit and provision, asset quality clearly remains excellent and I was not sure if you mentioned future reserve releases, John, but with such strong loan growth and credit matrix now looking stable, should we expect the reserve releases to taper off and might you need to start adding to reserves at some point if loan growth continues at this kind of pace?
John Shrewsberry, Chief Financial Officer
I think the short answer is yes. If we have robust loan growth going forward, all things being equal even that would contribute to the need for some amount of incremental provisioning. So it’s going to be a function of the amount of loan growth, the mix of loan growth, the quality of the portfolio overall and general economic conditions. One thing I would like to add to Joe’s first question also: there is no specific provisioning action in the 4th Quarter for what’s going on in the energy world. There’s nothing anticipated, nothing necessary at the moment, but – there is nothing in that quarter.
John McDonald, Sanford Bernstein
Okay. Did you make a comment about reserve releases? John, in the past couple quarters you’ve said reserve releases could continue. I was wondering if that changed a little bit now with credit bottoming – if I missed it or not.
John Shrewsberry, Chief Financial Officer
You know, with the size of the portfolio, the size of the allowance, and the amount of the 4th Quarter’s release, the $250 million, it’s close to call. We have said in the recent past to expect them to taper now for the reasons that you mentioned, and I described, there could be future releases. There could be future net provisioning. So we are at that point in the cycle, I think.
John McDonald, Sanford Bernstein
Okay, got it. And in terms of net interest income, the puts and takes, did you say how big the Dillard’s portfolio was? Or could you tell us?
John Shrewsberry, Chief Financial Officer
You know, we can’t – because of the nature of the contract we have with our customer. You could see the amount of loan growth in the credit card portfolio from quarter to quarter. That’s a combination of the organic growth and the Dillard’s portfolio.
John McDonald, Sanford Bernstein
Okay. And then any color you could offer on what opened up in terms of opportunity to deploy the liquidity this quarter? Anything driving that in particular?
John Shrewsberry, Chief Financial Officer
Well, some clarity around our liquidity framework, clarity around — further clarity around LCR, further clarity on what kind of cash versus other HQLA we would need to have. I think that emboldened us a little bit in terms of finding an entry point. But as we have said, these are difficult times for finding attractive entry points into fixed income markets when we are thinking about making that switch.
John Stumpf, Chairman and Chief Executive Officer
And John, also we had, as you know, continued very strong deposit growth.
Joe Morford, RBC Capital Markets
Got it. Okay, great. And just one last quick thing on TLAC, John. Rules aren’t finalized, we do have a proposal. How do you feel on that? And would you have to do some gradual preparing for that as you go forward?
John Shrewsberry, Chief Financial Officer
Sure. Well, depending on where the ultimate rule comes out versus the range that’s been published – at the low end of the range we have got less to do and at the high end of the range we would have more to do. There is still a lot a lot to know and there’s some wood to chop in the regulatory realm to get to the final rule.
We are on the record, as pointing out that we really don’t… the industry doesn’t understand the need for the magnitude of the total buffer that’s being… or loss-absorbing capacity that’s being talked about here. We certainly find that it lands a little bit harder on people who seem to have less risky business models, those of us who are deposit funded with a little bit more straightforward deposit taking and lending type of activity. We like some clarity on why that makes sense. But however it lands, within the range that’s been published, the approach for Wells Fargo is going to be to add more term debt at the holding Company level and that will have a P&L consequence that we have to navigate through. It’ll be substantially more manageable at the lower end of the range and somewhat more expensive at the higher end of the range.
Joe Morford, RBC Capital Markets
Okay, thanks.
Operator:
Your next question will come from the line of Erika Najarian, Bank of America. Please go ahead.
Erika Najarian, Bank of America
Yes. Good Morning. Thank you. I appreciate the color that you have given us so far on what you expect for mortgage originations in the 1st Quarter but as we think about the full year, and think about your comments earlier – high consumer confidence, accelerating GDP, in the context of potentially lower long rates for longer, is it possible that from an industry level, the origination growth for this year could surpass the current [inaudible 29:49] forecast of 6%?
John Stumpf, Chairman and Chief Executive Officer
Yes. You know, the number that the last time I have seen from them is $1.1 trillion to $1.2 trillion. Yes, it could be higher, based on those things. As I mentioned in my comments, with what was done recently on FHA and some of the things that GSE are doing, and if rates stay low or are favorable, surely we could see more activity, and, you could see actually more activity on both the refinance side and the purchase money side. We’ll just have to see how that goes, but, I don’t think there’s been any reduction or any update on those numbers from MBA, but it could be the higher end of that range.
Erika Najarian, Bank of America
Got it. And on the flipside to that, you mentioned that you did get more clarity on LCR and HQLA with regards to being more aggressive with regards to liquidity deployment, but John, you have mentioned several times that absolute level of rates has dictated your cash deployment or liquidity deployment strategy. As we look out into 2015, was the clarity around the rules enough to make you a little bit more aggressive about deploying your liquidity into earning assets, or is it going to continue to be largely rate dependent?
John Shrewsberry, Chief Financial Officer
It’s a good question. I mean, it’s substantially rate dependent at this point and loan growth dependent as well because that’s the first call on all of our available liquidity – is making loans available to customers. But if we believe that we are in a lower for longer long term rate scenario, separate that from policy rates for a moment, but just thinking about the 10 year and mortgage rates et cetera – at the margin that probably emboldens us a little bit additionally to convert what’s cash today into duration over the course of the year.
John Stumpf, Chairman and Chief Executive Officer
We still have a lot… we have checked the billions available. So, I mean, there’s just a lot of liquidity on the sheet.
Erika Najarian, Bank of America
Understood. And just a quick follow up. We appreciate the color that you gave in terms of the impact of energy. Have there been a lot of questions from investors in terms of what it would take for banks to adjust its qualitative reserve to reflect lower energy prices? I was just wondering if that’s how Wells Fargo does it, or do you really look at the reserve at least in terms of your energy commercial exposure on a name by name, loan by loan basis?
John Shrewsberry, Chief Financial Officer
In the case of commercial and corporate loans, it’s absolutely, some of the parts of name by name basis and the risk rating on each loan. We have hundreds of customers in the energy business. They are in the EMP or upstream part of the upper market. There are midstream companies. They are services companies. We have the largest team in this area, very long tenured, been through several cycles and we are working with growing customers – customer by customer and working through each situation to figure out what this drop means to them based on their leverage, based on their hedging profile, based on their assets, based on their management capability – and that will lead to risk rating changes on the loan by loan basis or name by game basis as time unfolds. And it’s that activity that would lead to changes in our reserving posture for the portfolio.
John Stumpf, Chairman and Chief Executive Officer
We don’t want to minimize this but this is the nature of that business. If you go back just six years –we’ve had $30 a barrel oil and we’ve had $140 a barrel oil. We’ve seen gas, for example, natural gas go from $6 – $7 MCF to $2 and some change today. And that’s just part of that business.
John Shrewsberry, Chief Financial Officer
On the EMP side of that portfolio – those tend to be reserve based loans asset-based loans with a very interactive approach between the bank and the borrower in terms of determining the value of the collateral and then re-margining the low down to reflect changes in the value of the collateral. And of course that’s at our discretion, we have our own engineers and we’re very engaged in that process, so, all of that ties into what the future reserving needs or requirements are for that portfolio. And as I said, nothing obviously has revealed itself yet and there’s nothing in the 4th Quarter specifically for that.
Erika Najarian, Bank of America
Got it. Thank you for taking my questions.
Operator
The next question will come from Ken Usdin with Jefferies. Please go ahead.
Ken Usdin, Jefferies
Hi. Good Morning guys. A couple of questions on the sea side. John, you had mentioned some of the tweaks you made in October on the service charge aside. So, I’m wondering if you can help us understand what types of changes those were, and then how you’re looking at the product set with regards to either payday advance and whatever pending rules, we could still get at some point next year on overdrafts, and if that would continue to have an impact on your deposit fees?
John Shrewsberry, Chief Financial Officer
So, what happened in October wasn’t a change in the product or what we charge for it. It’s rather, we unrolled some incremental technology that allows our customers to have more real time information to manage their own banking affairs. And they’ve been using that information and successfully reducing the amount of over drafting that they’re doing, which has had an impact on our revenue. We think it’s very customer friendly and we think it’s good for all of us. That’s distinct from any pricing approach or product approach that we’ve had.
Ken Usdin, Jefferies
Okay.
John Shrewsberry, Chief Financial Officer
You asked about short term or payday type lending. I think it’s clear that during 2014, we discontinued a product that we used to offer that was a direct deposit advance product that allowed people to borrow on a short-term unsecured basis with their next direct deposit paycheck as security for a source of repayment for the loan and some regulatory urging around that. I think most of the discussion around those types of products is now frankly outside the banking system because it’s private finance companies who are providing that and, that’s how it seems to be dealt with from a regulatory perspective. I’d also tell you that that discontinued product is out of the run rate at this point so the impact has been fully realized.
Ken Usdin, Jefferies
And then overdrafts?
John Shrewsberry, Chief Financial Officer
Hard to say much more about it other than we are not in the process of re pricing or re thinking the product capability. The results that you’ll see in our numbers are a reflection of the activity and behavior of our customers as they manage their own banking affairs.
Ken Usdin, Jefferies
Okay. Another question I had is just on the market related revenues. They’ve been trending a little bit lower, combined trading activity securities gains, equity investment gains, and that’s even with the student loan gain in that 354 number. Should we generically expect that you’ll still be able to generate this type of market related revenue, or is it more likely that you see that trend down over time?
John Shrewsberry, Chief Financial Officer
There is a lot of moving of moving parts there and I would look at a multi quarter average to think about how to model it. On the trading side, the customer accommodation, customer facing trading revenue that we make which is a pretty modest part of wealth Wells Fargo revenue profile, will probably have been in flow along the lines of what you are seeing in the industry, just at a more modest level. That trading line also includes the impact of our deferred comp hedging program so it’s a little noisy, given the magnitude of that versus the magnitude of our trading businesses. But those will be what they are based on industry factors and the deferred comp program will be more revenue and more expense in an upmarket and less revenue and less expense in a down market, generally speaking.
On the other elements, we’ve got gains from equity securities, gains from debt securities – in the equity space – you have seen some of the businesses that we’ve been involved in that frankly continue to be, are sources of revenue that we would anticipate seeing if market conditions stay the same as they are today, so I wouldn’t have modeled that down too heavily. On the debt side, given the levels of rates that we are at, and in some markets the levels of spreads that we’re at, there are some debt securities which it makes sense for us to sell and monetize from time to time, just because their market value substantially exceeds what we could imagine as their intrinsic or certainly their caring values so there would be pops in there from time to time as well, and it’s the some of those things that gets to that collection that you described.
Ken Usdin, Jefferies
Okay. And the last one. Maybe can you talk a little bit about the momentum in the trust business and what type of outlook you see just for asset gathering and after a really strong year, in that part of the business. Do you see, how is the pipeline for the asset growth looking?
John Stumpf, Chairman and Chief Executive Officer
You know, we are very happy and pleased with the progress we’ve made in that area. One of the biggest opportunities we have is relationship between David Carroll’s Wealth Brokerage Retirement Group and Carrie Tolstedt’s Community Banking Group. We have as many assets away from customers who call us their bank as we do under management right now, so, the relationship and the working here to there to bring those assets home, if you will, has been a big opportunity for us.
But I still view this, of all the opportunities we have had in the company in all of our businesses, probably that is our biggest opportunity to jump a curve or to even do to show some incremental growth above what you would see in other more mature businesses. So, a lot of opportunity there. Pleased with where we are. A lot more to do.
Ken Usdin, Jefferies
Thanks, guys. Appreciate it.
Operator
You next question will come from the line of Paul Miller with FBR. Please go ahead.
Paul Miller, FBR
Yeah. Thank you very much. There’s been a lot of news flow out today but on, if you mentioned this in the prepared marks I apologize, but your C&I loans jumped up. Is that where Ginnie Mae financing came through, on your balance sheet?
John Stumpf, Chairman and Chief Executive Officer
No. That’s not that Paul.
Paul Miller, FBR
So, that’s just pure, you know?
John Shrewsberry, Chief Financial Officer
The biggest thing to call out is the student loan financing that we did. We sold the portfolio of student loans and we provided some financing to the company who bought those loans. So, if one item that stands out in the quarter as outsized, it would be that. But those are all commercial loans.
Paul Miller, FBR
Yes. Is it any particular industry that’s doing well in, or across the board, and across geographic, that this line item picked up? This is one of the line items we have been waiting to see pick up, in general, among the bigger banks.
John Shrewsberry, Chief Financial Officer
Very broad based. Very broad.
Paul Miller, FBR
And you’re not seeing – the questions that I get is that everybody’s concerned about the energy credits but you are just not seeing – I know you made some opening comments about that – but you are not seeing anything on the negative side on energy credits at this point?
John Shrewsberry, Chief Financial Officer
Well, this drop in crude is very recent and the companies are taking the appropriate evasive actions to preserve cash, to deliver, to reduce their expense base etc. But it hasn’t worked its way into loan quality. Loan demand, certainly be down in that area I assume, but in the 4th Quarter, you can see what the change in net outstanding was, which more than makes up for whatever reduced demand there is in the energy space.
Paul Miller, FBR
Okay guys. Thank you very much.
Operator
The next question will come from the line of Bill Carcache with Nomura Securities.
Bill Carcache, Nomura Securities
Thank you. Good Morning. I had a question on your credit card growth strategy. I think most would agree that credit card asset yields have held up quite well in this low rate environment relative to other asset classes. Would you consider competing more aggressively on rates in an effort to grow your share of outstanding balances particularly since the high returned business where you arguably have room to give up a bit on pricing while still generating returns that are attractive relative to other lower returns or lower yielding asset classes?
John Stumpf, Chairman and Chief Executive Officer
Well, let me say it this way. First of all, we love the card business especially for our community bank customers and we have grown from the low to mid twenties penetration to now to 42% of our customers carry our credit card. And we like that business a whole lot. Not only from the balances we get, but to be relevant to our customers, as far as handling their payments, providing them services that are even around payments, and so forth for them. We want to provide great value, pricing, sure is part of that. You’ve seen recently where we have partnered with American Express. We do a ton of business with Visa on the higher and higher value cards. So, this is really a strategy about getting more cards top of wallet with our customers and pricing rewards, the whole value proposition is part of that. I wouldn’t say it’s just any one thing around price, per se, but it’s around value.
Bill Carcache, Nomura Securities
Great. Thank you. A separate question, if I may, on municipal deposits. Can you talk about how significant municipal deposits are to Wells? Are you de-emphasizing them given the relatively unfriendly LCR treatment? And to what extent do you see a future revenue opportunity for holding them?
John Shrewsberry, Chief Financial Officer
We have a very big municipal business and deposits are certainly part of that. It’s a service that we provide to the tax exempt issuing community. By municipal – it’s all forms of state and local and county government and other non-profit types of customers. The unfriendly LCR treatment came from the fact that municipal deposits tend to be collateralized by us, so that the municipal deposits are safer, in the event of a problem with their bank, and that wasn’t being taken into account in the original approach to LCR.
We think we’ve gotten a favorable outcome there; they are now LCR friendly, still very competitive. We still like those deposits. We still very much enjoy those relationships because there’s a lot of banking service that we provide to those types of clients, but they don’t have the LCR problem, that they might have seemed to have in pre-clarification that came out in the 3rd or the 4th quarters.
Bill Carcache, Nomura Securities
Okay. So it was my understanding that for the purposes of the LCR calculation in the numerator, the high quality liquid assets would not be able to include the collateral associated with the deposits, and hit had to outflow in the denominator on day one? Is that not the case anymore?
John Shrewsberry, Chief Financial Officer
I don’t think that you have it right. I think that it works fine. Incidentally, there were two issues that people were trying to address and tweaks to LCR related communities. The other one was whether high quality muni bonds would be considered HQLA on the asset side, and I don’t think that there’s been a resolution there. There are a number of our clients who issue high quality muni bonds, who take exception to that . We’ll see where that goes. But on the deposit side I think we’ve cracked the code.
Bill Carcache, Nomura Securities
Thank you.
Operator
Your next question comes from the line of Mike Mayo with CLSA. Please go ahead.
Mike Mayo, CLSA
I had a question about the efficiency ratio. First, what were the drivers in higher revenue driven compensation and deferred comp especially with lower originations and softer trading results? And then the following question to that is: you’re still at the upper end of your efficiency target, what can you do to get at least back toward the middle end?
John Shrewsberry, Chief Financial Officer
The drivers of the revenue oriented portion of increased compensation included a handful of businesses. I’d say investment banking was one of them where we were up $150 million in the quarter. So, some portion of the elevated expense is attributable to that, but it comes from a few others as well. And again it’s those businesses that performed better in the 4th Quarter so it can be with 90 different businesses, it can be a little here a little there. That was part of it. So, we find ourselves in the high fifty eights, for now 59%, with a lot of emphasis on trying to be as efficient as we can, how we spend our money every day.
There are no guarantees that we’re moving toward the middle of the lower end of the range in this interest rate environment and as we go through a full year, while we are tackling things that we need to tackle, we spend a lot of money on risk management, compliance related initiatives, other things that have a regulatory origin. Some of that is semi permanent, might be around for several quarters. Some of it is going to be around in the run rate for a while. If rates begin to move up, that’s probably moves us down in the range, but frankly at 59% which is the high end of our range, we can tolerate that. We think we are performing really well.
John Stumpf, Chairman and Chief Executive Officer
Mike, you are hitting one of the important issues for us. As John mentioned, we take this seriously. We are looking for all those opportunities to eliminate expenses where customers don’t find value and it’s an ongoing continuous process for us – reducing square footage, it’s one of those; looking hard at the kind of money we spend that is not revenue producing, if you will. But also making sure that we take a look at the long-term so we continue to invest in things like, late last year, Apple Pay and other things that we do to provide convenience for customers so it’s always don’t waste but also we take a long term view. This continues to be a big focus for us.
Mike Mayo, CLSA
Correct me if I’m wrong, I mean, you have a 55% to 59% efficiency target range and what I’m hearing now with the rate environment we might be at 9% whereas I wasn’t sure if I heard that same message before. Saying unless rates go up, we won’t get to the middle part of the range and you were a little bit lower for 4th, so am I hearing the message wrong or is it simply that you’ve done what you could for so long with the low rate environment and you can’t do a whole lot more. What is it that leads you to say, well, that 59% is okay?
John Stumpf, Chairman and Chief Executive Officer
Well, I think we had the range. We knew that we would, you know, sure, we would love to be at 55% but we also recognized that that’s why you keep a range. Think of them as guardrails. We are spending more in cyber today. We’re spending more on all things risked. On the other hand, we’ve not yet pulled out all of our expenses around loss mitigation. We continue to make investments and distributions. So, you know, I guess a range is a range. I can’t guarantee the low end but if we are at the high end that’s also acceptable. In our mind, if we are making the right investments in the right things, and eliminating expenses where we think they can be eliminated. So that’s how we feel about it.
Mike Mayo, CLSA
And then the follow-up, the cyber expenses or the all things risk expenses, have these ticked up some or is this kind of what you had expected?
John Stumpf, Chairman and Chief Executive Officer
They’ve ticked up in the terms of, we continue to make more investments there, and we are starting to get the annualization of expenses we made last year. We will get more efficient in that over time, but we’re spending the money we think we need to spend – sometimes that’s hiring consultants and then over time you can convert whatever they’re doing to team members –which tends to be more efficient. You are not as efficient on every process the minute you adopt it or employ it. But more money is being spent there.
Mike Mayo, CLSA
All right. Thank you.
Operator
The next call is coming from the line of Matt O Connor with Deutsche Bank.
Matt O Connor, Deutsche Bank
Good Morning. If I could just follow up on the net interest margin which was down just two basis points which I think is very good in this kind of environment. I looked at some underlying details on the yields of the securities and using the loan yields, I guess I don’t totally understand how they’ve been so stable and wondering if there’s anything, may be, and that you can add on, maybe first securities, you have been growing it. And the yields have been, you know, remarkably resilient.
John Shrewsberry, Chief Financial Officer
It’s just math. What we’ve been growing hasn’t been that extraordinary in terms of incremental contribution to the weighted average because the denominator is as big as it is. If we continue to deploy as I know you know, in this environment, ultimately it will start to skew down the weighted average returns. And also we have been attending to invest in treasury and agency securities and just from a credit quality point of view, that’s going to bring down returns. Setting aside historical book yields versus current book yields in the shape of the curve when the investments were made. We’ve got corporate and communities [inaudible 53:20] and some other things in the starting portfolio. We are just adding US treasuries, it is going to bring things down but it just hasn’t revealed itself yet because the numbers have not been big enough yet.
Matt O Connor, Deutsche Bank
Okay. And then on the loan yields, I guess they’ve been surprisingly resilient as well. Do you feel – I know it’s a blend of eight or 10 categories, the way you disclose but – generally speaking, loan yields have stabilized? I was looking at the C&I , it was actually up a couple of bits, but really up and down, the portfolio, it feels like there’s been pretty good stability the last three or four quarters.
John Shrewsberry, Chief Financial Officer
I think that’s right. We are in the fiercely competitive market. Not every bit of composition is in the last basis point of spread on the loans. Sometimes it’s in the structure of the loan – of course there are places we will back away from when that happens – but it is competitive. It hasn’t all shown up in price.
Matt O Connor, Deutsche Bank
Okay. And then, I guess, putting it all together, as you think about net interest margin percent going forward, probably largely dependent on loan growth, but how do you think it shakes out? Obviously the rates where they are, doesn’t help. Is it just mild pressure or is there more material pressure to come?
John Shrewsberry, Chief Financial Officer
It depends on on the pace of continued deposit inflows and how that gets redeployed. If deposits remain steady where they are, then the loan growth and the redeployment from cash into investment securities is going to be very supportive of income [inaudible 54:56]. If we keep getting high single digit or even low double digit deposit growth and the loan growth isn’t happening at the same pace, or redeployment into investment securities doesn’t make sense at the same pace, then the math is going to put pressure on that calculation.
And as you know that’s not a calculation. We are managing too. It’s an outcome of the other things that we’re doing. But the driver there is the growth in deposits and how you responsibly deploy that into either loans or securities in the same timeframe that the deposits are coming in.
Matt O Connor, Deutsche Bank
Okay. Alright. That makes sense. Thank you.
Operator:
Your next question comes from the line of Betsy Graseck with Morgan Stanley. Please go ahead.
Betsy Graseck, Morgan Stanley
I had a question on investment spend and thoughts around mobile wallet with Apple Pay obviously you did a lot of work there. Is there an opportunity to take those investments and potentially expand them into mobile wallet, real time banking, other tokenization strategies?
John Stumpf, Chairman and Chief Executive Officer
We are doing a lot of work in all those things, about the so-called paperless store, and doing real time cash letters, and helping customers with real time information – not understanding which channel they are involved in. So I would say all of the above is important. What we found, which is interesting is that our most loyal customers today are the ones who use the channels most often – and most types of those channels. So, even for those customers who are very advanced in technology and use of technology – who might be dominant in that channel – still visit stores, on an infrequent but regular basis. They go to ATMs so there’s lots of things. Some of the investments we’re making is to set up an appointment with a banker using your technology. We are testing things: about being able to authenticate customers knowing they are in the stores, working on things that would authenticate at an ATM machine, may be using your mobile phone/device, so there’s just lots of things going on there.
And we’re actually learning a lot of those things from retailers and other service providers outside of our industry. So, pretty exciting stuff.
Betsy Graseck, Morgan Stanley
And do you feel that this is like, table stakes, and well, just maintain share or do you think that you’re doing things that could potentially drive share up? Drive down that expense ratio?
John Stumpf, Chairman and Chief Executive Officer
Well, I think about less of an expense ratio but these are more than they are table stakes in some cases, if you don’t have a mobile offering, you’re probably not going to serve most millennials today. But we think it is more than table stakes. We think it’s a big reason why we’re growing net new primary checking accounts over 5% a year. Deposit growth, we’ve had clearly is as a result of partially a result of our distribution model and the Army Channel view we have of these various channels. Not separate businesses but combined into really centric around the customer needs and convenience. So, our growth is, I think, reflective of our commitment to that.
Betsy Graseck, Morgan Stanley
I’m just wondering too on the Dillards, because, I would expect that retailers also want best in class mobile apps etc. Is this part of what we should expect? You will be delivering to Dillards and other private label portfolios that you win?
John Stumpf, Chairman and Chief Executive Officer
Well, I don’t want to speak about a particular situation, but I’ll just give you this. 16 years ago, we didn’t have an online offering. Today, over 80% of our customers are actively online some 28 million or 24 million customers actively online. On the consumer side, five years ago, we didn’t have a mobile offering. Today we have over 14 million customers on that. I mean, mobile is the fastest growing fastest adopted channel we have had in our history of our company. Things that customers can now do mobile and things they’ll be able to do in the next year or two, as we continue to introduce new capabilities, is really exciting. So, watch for this. It’s really important.
Betsy Graseck, Morgan Stanley
Okay. Thanks.
Operator:
Your next question comes from John Pancari from Evercore ISI. Please go ahead.
John Pancari, Evercore ISI
Good Morning. I am going to kick the energy horse here again, so, my apologies. But first of all, can you just help quantify your total leverage loan book, what size it is; and then, of that leverage loan book, how much is energy?
John Shrewsberry, Chief Financial Officer
Sure. So we don’t have a leverage loan book. We have loan portfolios – in various lines of business. We have an energy loan portfolio, which would include both oil and gas, and as I mentioned it’s about 2% of our loans overall, it includes E&P companies, it includes midstream pipeline companies, and it includes services companies. It also includes some investment grade integrated oil names, but, the sum of that is about 2% of our total loan portfolio. Some of those companies will have higher leverage, some of those companies will have lower leverage but we don’t drop a portfolio line along the level of leverage.
John Pancari, Evercore ISI
Okay, and, then separately, related to that, do you have the amount of bond exposure that you may have held in your trading portfolios for any deals that you’ve done in the energy sector. Do you have that quantified?
John Shrewsberry, Chief Financial Officer
Yes, it’s a good question. So, I’ll quantify for you our total securities exposure including what’s in trading and also in what’s in AFS because we had some corporate investments in energy names as well and the sum total of both of those is less than $1.5 billion at Wells Fargo; and much smaller portion in trading which of course is marked to market through the P&L every day and somewhat larger percentage of that sitting in AFS which we mark every day but the value change goes through OCI.
John Pancari, Evercore ISI
Okay. Alright. And then separately on the loan growth. I agree, good pickup that we saw in C&I for the quarter. As we look out into 2015, is it fair to assume that you should see some acceleration in the loan growth that you’re looking at for 2015 versus what you achieved in 2014? I think you are in the 4% to 5% for 2014. Is it fair to assume that that accelerates from there, the next year, for the full year 2015?
John Shrewsberry, Chief Financial Officer
I think knowing what we know about the economy today, we feel better about the next four quarters than a couple of the last four quarters. So, if our most recent quarter is the continuation of a two quarter trend, then yes, we’ll probably have higher loan growth or higher amounts originated. Now the denominator keeps growing as we grow the size of the portfolio and at some point the rate gets impacted by that, but yes, it feels like a good year for loan growth.
John Stumpf, Chairman and Chief Executive Officer
You know, John, we think if you’re going to grow revenues over the long run, you have to be growing households, cross-sell deposits and loans. And we sure plan for all of those.
John Pancari, Evercore ISI
And then my last question I know there was some questions around excess liquidity reinvestment and what you’ve been buying – buying treasuries and agencies. Do you have what directions and what yields that you purchased in the quarter, just to get an idea of what the ultimate impact could be on the margin?
John Shrewsberry, Chief Financial Officer
Yeah, we don’t lay it out quite that way. You will see in our tables what we’re talking about. It’s treasuries and agencies, the timeframe, I can tell you we’re in the intermediate part of the curve. So that will probably get you there.
John Pancari, Evercore ISI
Okay. All right. Thank you.
Operator
You next question comes from Eric Wasserstern with Guggenheim Securities. Eric your line is open.
Eric Wasserstern, Guggenheim Securities
Good Morning. So, just to follow up on the Op Ex for a moment – I understand the discussion of the ratio, but just in terms of absolute level, based on what I’m hearing in terms of your loan growth expectation, it sounds like we should be anticipating an absolute level of expense that is higher than what we saw in 2014. Is that correct?
John Shrewsberry, Chief Financial Officer
It’s really tough to say, which is why we talk in percentages, and think about things in terms of a range. You can see the items that we’re calling out as feeling seasonal in Q-4 and there’s a handful of them and they amount to a few hundred million dollars. And then of course in Q-1, we typically have escalated personnel and benefits expense as well. In terms of the Op Ex or the investments that we are making in Risk Management etc, they will be elevated for some period of time but because of all of the other drivers to the total expense number, it’s possible that we operate and there’s a reasonable expectation that we operate at a lower level than we have in the last couple of quarters because we are always pushing down on things where we can’t. So that’s why we give you the range.
We think we’re going to be in the range, in 2015, like we have been in 2014. One other item I did mention for those that are newer to it, we do have this deferred comp element that shows up in expense even though it’s a P&L neutral item. And that creates 100 or in some cases a couple hundred million dollars worth of noise in any given quarter which is material given the difference that we are talking about here today.
John Stumpf, Chairman and Chief Executive Officer
Eric, even though we are at the high end of the range now, one should not assume that it’s not top of the line around here. It is. It remains top of the line. And it’s always looking for opportunities to be more efficient, but also continue to invest in the future because we do have a long term view.
Eric Wasserstern, Guggenheim Securities
Right. Right. Of course. And the financing that you provided on the student loan sale, what is the expected duration of that?
John Shrewsberry, Chief Financial Officer
So that financing probably comes down over the course of next couple of years on a relatively steep curve as the portfolio gets permanently financed into student loan AVS. And so my expectation, I think the reasonable expectation, is that it’s average life would be, maybe, a little bit more than a year, as it comes down.
Eric Wasserstern, Guggenheim Securities
Got it. And, just quickly one last thing, the tax benefit that you mentioned in the period from the change in federal tax law, is that a permanent benefit and what should we expect for your go forward GAAP tax rate?
John Shrewsberry, Chief Financial Officer
So what happened in the 4th Quarter is both the impact of the extender legislation that came in at the end of the year as well as the resolution of some discreet matters that we have been working on with the various taxing authorities for some period of time. I would look at recent prior years for what a good expectation is for our tax rate going forward.
Eric Wasserstern, Guggenheim Securities
Okay. So largely unchanged at some point?
John Shrewsberry, Chief Financial Officer
I think that’s right.
Eric Wasserstern, Guggenheim Securities
Thanks very much.
Operator
The next call comes from the line of Chris Mutascio with KBW.
Chris Mutascio, KBW
Good Morning guys. Happy New Year to you. A quick question for John Shrewsberry. You noted investment securities portfolio has been increasing quite materially over the last year, I think it’s up about $50 billion. Can you tell me what portion of that is Ginnie Mae MBS? How much is that Ginnie Mae portfolio if you have exposure, has that grown in 2014?
John Shrewsberry, Chief Financial Officer
It’s negligible.
Chris Mutascio, KBW
So the refinance activity there with 50 basis points cut plus rates being bad – I don’t know what the impact would be – perhaps on the margin, but your Ginnie Mae exposure is negligible?
John Shrewsberry, Chief Financial Officer
Negligible.
Chris Mutascio, KBW
Thank you very much.
Operator
Your next question will come from the line of Nancy Bush with NAB Research.
Nancy Bush, NAB Research
Good Morning Guys. Happy New Year. Two questions for you. John, you mentioned the changes at in the GSE’s and at the FHA with regards to allowable mortgages etc. This has been a remarkable turnaround in Washington since the days of the financial crisis when everybody was cracking down on mortgages and we are in a reverse posture now. As a result of this, do you see any changes that you might make at the mortgage company in terms of businesses that you exited, the wholesale business etc. that you might want to go back and re-visit?
John Stumpf, Chairman and Chief Executive Officer
No. First of all, I think those are positive changes that have been made. I think they’ve been largely made because it got too restrictive and customers who deserved loan who wanted to buy a home, could afford it, could not get credit. I don’t want to overstate the amount of those folks but there was that element. And I think we’ve come to a much better place with regulators, with the industry and with customers. But no, we don’t have any intention of going back into joint ventures or the wholesale business. We like the business mix we have now.
Nancy Bush, NAB Research
Okay. Second question is this. There was I believe a heard on a street column a few days ago in the Wall Street Journal about the impact of the energy, price drop on various banks, and John, I think they mentioned that the figure of 17% of revenues comes to mind with regard to your capital markets businesses related to energy. Could you just clarify that where you stand in capital markets with relation to the energy business and if there is going to be a big impact in revenues there?
John Shrewsberry, Chief Financial Officer
So in that article they referred to geologic information for 2014 that suggested that we had about $280 million worth of underwriting revenue from energy related activity. So that would be debt and equity underwriting and probably loan syndication fees as well. So that’s the order of magnitude. The 17% would refer to that as a percentage of the US investment banking revenue for full-year 2014. So, in terms of at risk or where it goes from here, that’s a starting point for last year. And it’s bounced around between $150 million and may be $300 million over the course of the last several years.
Nancy Bush, NAB Research
Okay. And just one more question, John Stumpf, for you. You’ve been very positive on the direction of the American economy for the last couple of quarters, and I think you remained that way. I don’t know if you saw your predecessor, Mr. Kovacevich on CNBC a couple of mornings ago, and he was not so positive on strength of the American economy. I’m sure you still talk to Dick from time to time, what is behind the different views?
John Stumpf, Chairman and Chief Executive Officer
Well, you know, I obviously respect Dick’s view and there are different views in the economy. But that being said, and there is volatility clearly. Today look at the retail sales, probably see it differently so you can feel differently on a day to day basis. But when I look at the businesses that we’re in, and as I’m talking with customers which I am every day, and talking with our business leaders, and frankly looking at the numbers, 50 consecutive months of employment growth, unemployment in the 5.6% range, GDP 5% and we would probably have a few quarters this year that start with threes.
So I’m optimistic. I don’t think this is a breakout but I think we’re on the front foot and consumers’ confidence is at an all-time high since the downturn. So the way I read the tea leaves, I’m optimistic.
John Shrewsberry, Chief Financial Officer
I think Dick also suggests that we could have gotten here sooner. We could be at higher levels.
John Stumpf, Chairman and Chief Executive Officer
And that’s fair. I would agree with that.
Nancy Bush, NAB Research
Okay. Thank you very much.
Operator
Our final question will come from the line of Marty Mosby with Vining Sparks. Please go ahead.
Marty Mosby, Vining Sparks
Hello. I would wrap it up for you. Wanted to look at the capital deployment ratios. If you look at your total payout this quarter, it’s 72%, which is, I think close to your stated target, you talked about 75%. So, the increased capital deployment from here, are you going to need to see some earnings momentum or do you think you could push past that 75% payout ratio?
John Shrewsberry, Chief Financial Officer
So our target is 55% to 75% and you saw that it bounced around during the course of the four quarters of 2014 for a few reasons. One of them is that we do more share issuance in connection with our benefit plans in the first half of the year and so it drives down the net payout ratio. But the first call on our capital is to be available to support more loan growth on behalf of our customers. So, the capital deployment horse is out in front of the net payout cart and that’s important to remember because we are not hoping that we have enough to support the business growth after we think about distribution. We’re making sure we have enough to support business growth and then we are factoring in distribution behind that. So, we anticipate continuing to operate in the range quarter by quarter, 55% to 75% and the 4th Quarter was a high take on that in the 70s.
Marty Mosby, Vining Sparks
And I was really kind of looking back towards the ‘E ‘part of that which is as earnings grow that gives you more chance. What kind of catalyst do you see while we’re waiting on interest rates to create some incremental earnings momentum reigniting that that we’ve seen slowdown over the last couple of quarters?
John Shrewsberry, Chief Financial Officer
Sure, it’s loan growth for sure. It’s redeployment of excess liquidity and do higher yielding earnings assets. It will be what the impact is on expenses that we’ve been talking a lot a little bit before, if we do as expected there. Then it’s the various sources of fee revenue which reflect quarter to quarter up year over year but there’s a lot of momentum in places like cards, places like investment banking, trust and an investment fees overall, we just talked about the slightly more bullish case for mortgage this year. All of those are catalyst for growth.
Marty Mosby, Vining Sparks
Thanks.
John Stumpf, Chairman and Chief Executive Officer
Thank you and thanks everybody who joined us today, and again, happy new year to everybody. Thanks for your interest in Wells Fargo. See you the next quarter.
Operator:
Ladies and gentlemen, this does conclude today’s conference. Thank you all for joining. You may now disconnect.
